Statement of Work (SOW)

Business leaders are knowledgeable about contract documents, regardless of their line of work. In software, contracts are critical.

Something you will almost certainly encounter in the technology industry, specifically in staffing, is a statement of work or SOW. It is an essential clause or section of a contract that seeks to define agreements between the parties involved in an agreement in relation to products, software or the provision of services. It is generally considered separate and distinct from a staff augmentation model.

What is the difference between staff augmentation and a SOW? Can you really have a staff augmentation SOW? These are some questions that will probably be on your mind if you are involved in software outsourcing.

What is a statement of work?

A statement of work is part of a larger, legally binding contract. Its purpose is to outline expectations for the services provided in specific terms: requirements, performance, design, features and other aspects of the project, including the responsibilities of both parties – usually the service provider, such as a software outsourcing company, and the customer . . Ideally, the SOW will prevent misunderstandings, misinterpretations, and other confusion in the future.

A SOW is a general overview, although it contains specific terms. It may be accompanied by additional documentation containing examples and other details, if necessary. They must be written in clear, direct and understandable language for all parties involved. This means as little jargon as possible, as customers may not be well-versed in this type of technical language.

Everyone involved must agree and sign the terms outlined in the SOW and larger contract.

SOWs are not limited to software or technology fields. You will find them in every industry that involves project management. Many areas consider them vital for defining the scope and execution plans of the project – a means of avoiding conflicts during the course of the project.

What is included in a SOW?

A SOW includes many different components. Some of the most important parts are described below.

Key Performance Indicators (KPIs)

KPIs serve as a standard that indicates whether the supplier has met the conditions established by the customer. Essentially, they are metrics that define success and provide a measure of whether work has been completed.

Statement of purpose

What is the objective of the project? This must be indicated at the beginning of the document, explaining the objective and reasons for the entire undertaking. It is important that both parties keep this in mind throughout the project.

Scope

The scope explains what is involved in the project, including the initiative's timeline. An important reason to include it is to avoid scope creep, which occurs when requirements get out of control and exceed the terms of the contract.

Requirements

Requirements are the demands of the project – the elements that form the basis of delivery. These are mandatory requirements and the project cannot be declared complete unless the supplier has complied with them.

Timelines, milestones and benchmarks

The SOW should identify an estimated timeline for the project, including the completion date. Additionally, it should outline key milestones and benchmarks, which indicate how the project is going and whether everything is on track.

Deliverables

This is the actual product – what the supplier is expected to deliver upon completion of the project. The SOW must define what these deliverables are – precisely what the customer should expect to receive.

Payment terms

Payment terms are not just limited to the amount the supplier will receive – they also describe a budget for the project, the frequency of payments, the payment delivery schedule, the currency, and so on.

Additional elements to be included are:

• Industry standards and requirements
• Project complexity and risks
• Necessary equipment, tools and materials
• Relevant issues or complexities
• Signatures of all invested parties

What is the difference between a statement of work and a staff increase?

Now then, what is the difference between a SOW and a staff increase? These are two common ways of outsourcing projects and work in general.

Staff augmentation in the US is typically defined as a more flexible alternative to a fixed contract. In this arrangement, a vendor provides talent as needed for different purposes. For example, a client may need help with a specific project. The vendor does not complete the project externally – instead, it helps the customer fill gaps and complement existing talent. Typically, there is no defined end point.

So, staff augmentation versus SOW – which is better?

It really depends on your needs. Both models can be short or long term. Both can help you achieve your goals. But they differ on several key points.

For example, in a SOW scenario, you typically hire the supplier directly or the distributed team to manage the project from start to finish. Meanwhile, when using staff augmentation, you'll likely turn to an outside vendor who can find the right talent for your projects. This separates the client and the talent to a degree. Furthermore, the model is intended to address specific challenges at a given point in time.

Furthermore, in a staffing model, the results are not as clearly defined – the client uses workers as they see fit. Although these workers are not permanent employees, they still report to the team manager. This contrasts with a SOW agreement, where the project is handled externally in its entirety.

Another important point to consider when evaluating engineering staffing agencies: Workers in a staff augmentation model are typically paid hourly through the vendor, while a SOW sets pay within the contract upfront.

Can you have a staff augmentation SOW?

This doesn’t mean you won’t have a staff increase agreement – ​​this is important for any employment agreement. However, it is rare to find a staff augmentation SOW.

This is because the two agreements follow different models, with a SOW agreement being strictly defined and a staffing agreement being more flexible and on-demand. That said, if you have clearly defined needs for staffing and clear start and end dates, as well as outlined deliverables, it will be possible to create a statement of work in this scenario.

Let's start your project today!